London stocks plunge after inflation rise

London’s main markets slid in value on Wednesday as a surprise uptick in inflation resulted in a dire trading session.

The Office for National Statistics (ONS) revealed that Consumer Prices Index (CPI) inflation rose to 4% in December, up from 3.9% in November - marking the first increase since February last year.

The rise caught traders off-guard and pushed back expectations that interest rates could be cut soon, dragging the FTSE 100 to its lowest for seven weeks in the process.

London’s top financial index moved 1.48%, or 112.05 points lower, to finish at 7,446.29.

Chris Beauchamp, chief market analyst at IG, said: “The FTSE 100’s 2024 has gone from bad to worse following Wednesday morning’s inflation data.

“Today’s UK inflation news has hit the domestic stocks hard but international firms like the mining sector have taken a knock from the stronger dollar driving commodity prices lower.

“This double-whammy spells trouble for the index, and a return to the October lows is a distinct possibility.’’

Elsewhere in Europe, the main markets were also lower as they also took cues from disappointing economic data from China.

The German Dax index was down 0.84% at the close and the Cac 40 closed down 1.1%.

Stateside, the main US markets followed Europe to open lower although with more modest declines.

Sterling was the main beneficiary of renewed expectations that rates could stay higher for longer.

The pound was up 0.24% at 1.266 US dollars and was 0.48% higher at 1.166 euro at market close in London.

In company news, pub and bar group Mitchells & Butlers was among the day’s few risers after it cheered “strong’’ results over the first eight weeks of its financial year.

The company behind All Bar One and Toby Carvery said it expects the sales outcome for 2024 will be towards the higher end of its current financial expectations after 7.2% likefor-like growth over the past two months.

Shares in the hospitality firm were up 9.2p at 264p as a result.

Handbag maker Mulberry closed lower after it became the latest firm weighed down by the slowdown in demand for luxury goods.

The British high-end retailer told shareholders that group revenues fell 8.4% in the 13 weeks to December 30, with retail sales down 1.5%.

It was down 10p at 135p at the close of play.

Elsewhere in retail, Superdry had another weak session after reports on Tuesday that it drafted advisers from PWC to assess its debt options. Shares closed 4.8p lower at 21.2p.